Eurocement aims to raise EBITDA margin to 40%, expects revenue growth in 2016 despite market slump
MOSCOW. March 14 (Interfax) - Eurocement Group plans to increase its profitability by cutting costs and maximizing utilization of capacity at its plants with a more efficient, dry method of cement production.
Eurocement has an EBITDA margin of about 30% in 2015, company CEO Mikhail Skorokhod said in an interview with Interfax. The company does not disclose its revenue or profit figures.
The group's medium-term goal is to raise its EBITDA margin to 40%.
"We are now optimizing all expenses, including logistical and commercial, implementing a program to manage costs at our plants. And most importantly, plants are being utilized with a dry method of production, which results in lower production costs for the group. About 70% of the reduction in costs happened thanks to maximum capacity utilization at the plants that we have put into operation and integrated. Dry plants, as a rule, have a margin of about 50%," Skorokhod said.
The company expects demand for cement in Russia's construction sector to drop 5-10% in 2016 after falling 11.5% in 2015, though the second half of the year is expected to be much better than the first half thanks to the implementation of major projects such as construction of venues for the 2018 World Cup and reconstruction of runways at airports.
Nonetheless, Eurocement expects its revenues to grow on the back of price increases. "We haven't changed the prices for our product for five years, so in the dollar equivalent the price has fallen by at least half. A great deal of inflationary pressure has accumulated over this period and we see that in 2016 the price for cement products must increase by about 15%," Skorokhod said.
Eurocement estimates that it has a 34% share of the Russian market and it plans to maintain this share in 2016. Production of cement using the dry method is expected to exceed 60% of the company's total production this year, almost double last year's figure.